Family owned businesses play a key role in the Indian and global economy. The influence Family owned businesses have on business and economics is a critical component for the success (or failure) of an economy like India. Research by prominent institutions have found that Family run businesses are more resilient during economic turmoil and have a strong record of out-performance.
Statistics show that only 30% of family owned businesses succeed to the second generation and only 12% move on to the third generation. If family owned businesses have such great success why is this not resulting in better generational transition?
Studies have pointed to the lack of good governance. Even today, very few family enterprises in India have a succession plan or have a formal family shareholder agreement. These are key to the success and longevity of a family business enterprise.
To improve the chances of the family business’s success from generation to generation it is important that the family, and the family businesses, commit to implementing good governance policies and practices. This includes a clear succession process. When it comes to running a business, the toughest decisions can be around succession. Every family leader wants to make the right choices, for the business – and for the family. Starting early is critical for a smooth transition. By making decisions and developing transition timelines, the family can avoid conflict and build the support and buy-in a successor will need.
Each business has a unique element that no other business has – the aspect of the family. This difference can play a significant role in decision making and offers both opportunities and challenges. At Priwexus, we understand that the growth and sustainability of any family business lies in the fine balance between the needs of the business and the expectations of the family members.